If you know that you and your siblings will inherit a house from your father or an aunt, it may be advisable not to wait until it is transferred to the heirs after their death. It is often more efficient for the testator to transfer their assets during their lifetime, i.e., to gift them. This creates legal clarity because the testator's wishes are clearly defined. Furthermore, substantial tax allowances can be claimed.
Especially with real estate, such an anticipated inheritance can be advisable, because unlike financial assets, a house or apartment cannot be divided. And real estate heirs are not always able to pay the inheritance tax and compensate their siblings proportionally according to the property's value. In the worst-case scenario, they may have to sell the property.
Anyone wishing to spare their descendants high tax payments can gift their property. The donor can stipulate that the gift takes effect upon their death ("cold gift"); however, they can also benefit close relatives during their lifetime with a "warm gift." In both cases, the beneficiaries must pay gift tax on the property. The amount of tax depends on the degree of kinship to the donor, their own tax bracket, and any applicable tax allowances.
Direct descendants, such as children, have a tax-free allowance of €400,000 each. This allowance can be claimed every ten years when gifting property during the donor's lifetime. The catch is that the property cannot be sold during this period. The market value is used as the basis for calculating the tax. Registered rights of residence reduce the tax because they legitimately lower the property's value and would make it more difficult to sell with this usufruct.
No donor needs to fear losing their rights to the property after the transfer. Their risks can be mitigated with rights of residence and usufruct. With the latter, the donor retains the right to use the property and collect rents even after the transfer. At the same time, they are responsible for ongoing expenses. These legal obligations are recorded in the land register.
In serious cases, the gift can be revoked due to gross ingratitude. Furthermore, a right of revocation can be stipulated in the notarized contract.
If you wish to transfer real estate assets to distant relatives such as nieces or godchildren to whom you are not related, you have the option of adopting them. They are then treated like biological children for tax purposes. This means they benefit from high tax allowances if real estate is gifted or inherited to them.
The topic of gifts and inheritances is often avoided during one's lifetime because people are reluctant to confront their own mortality. However, clear agreements after death can prevent many disputes. Often, testators verbally promise their heirs real estate or financial assets before their death. In reality, however, such declarations of intent have no legal standing.
Are you considering gifting a property or are you about to receive a property transfer? We can help you with the valuation.
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